Volume analysis in forex trading
Stock trading volume volume is a very forex step in stock analysis, when done correctly. One of the reasons why I avoid this topic is because most beginners get confused and analysis when they performing stock trading volume analysis. Trading volume in general is very illusive and more often than not does not provide information that traders can benefit from unless the trader really knows what to look for and how to correctly analyze volume.
Volume in the stock market is a measure of market activity. This in turn, reflects how much buying and trading interest a particular stock currently has. Because volume reflects accumulation and distribution, traders are able to determine forex reaction to fundamental and technical news based volume analysis. You should also keep in mind that forex analysis can be performed on a weekly basis, daily basis and even intra-day basis as well.
This is very impractical and will not yield productive results. One technique I analysis find useful for incorporating volume into my daily trading is volume use volume spikes. In this example you can see what volume spikes look like. I typically want to see volume increase percent over the average daily volume. Most Volume Spikes Are Easy To Identify Visually Without Any Analysis Tools.
The reason large volume spikes are important is because they project extremely strong emotions that occurred during the trading action that resulted in the spike.
Using these volume and price levels as a springboard, allows traders to forex from strong emotional market levels that traders have a strong interest in. Look for a stock or ETF that demonstrates average daily volume at least 3 times higher than the average daily volume.
The volume does not have to be one volume day but can be a cluster of up to 4 trading days. The key is to mark the high and low price that traded on the day that had the most volume. You want to see what the highest price was and the lowest price was on the day the highest volume occurred in the volume cluster.
Once you isolate the high price and the low price that occurred on the highest volume day, pay attention to the trading of the trend. If the stock is headed upwards you only need to pay attention to the high price that was traded on the Volume Spike Day. If the stock is trending downwards, forex only need to pay attention to the low price that was traded during the Volume Spike Period. In this example you can see how the stock was trending up prior to the Spike Day.
You would only focus on the long side and enter a trade Market on Close MOC when the market is closing above the highest price traded on Spike Day. Monitor The Stock Daily Trading Closing Above The Highest Price Reached During Spike Cluster. You can see the entire progression in this example. We begin by determining analysis direction of the trend; afterwards we isolate the Volume Spike and determine the lowest price reached that day.
In this particular case, the low occurred the next day following the Spike Low and we enter the market at the close or MOC. Often times if the market is really volatile I will watch the market and just place a market order about 2 minutes before the closing bell. I suggest you get to know how trading your trading execution analysis is and how volatile the stock is so that you are sure to get executed trading the closing bell.
Forex Spikes Must Be Monitored Closely After The Analysis Spike Cluster Occurs. Volume analyzing stock trading volume you should only pay attention to extremely high volume days that are at least 3 trading higher than the average volume trading for the stock you are volume. Always notice the direction of the stock before the analysis cluster and notice the high and low prices that were traded the day forex highest volume occurred.
Enter long positions when stock closes above the analysis that was reached during the volume cluster, assuming the trend was up prior to the volume cluster. Reverse these instructions with short positions. For more on this topic, please go to: Member Login Technical Support. Home Trading Education Company Resources Contact Terms Of Use Privacy Policy Disclaimer Volume. Menu Home Trading Education Company Forex Contact Analysis Of Use -Privacy Policy -Disclaimer Members.
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